Undoubtedly, the most mystified success factor is funding. People have all kinds of theories about how to go about getting the investment necessary to start and grow a business. The mistake they typically make is to think of funding as something separate from or additional to the process of putting a business together. Worse: some people talk as if you should or even can get funds before doing anything else. This leads to all kinds of confusion about what funders are looking for and how to appeal to them.
If you do all your homework, funding will find you
The truth is that funding your company really is quite simple. It is no more and no less than the certain consequence of doing all your homework and getting the process right. If you have the other five success factors in place, funding will find you. A business based on a great idea, in the right context, with a solid business model and an A-team that excels at execution is never going to be short of willing funders.
Look for the funder, not the funding
Nevertheless, the key word is precisely funders, not funding. It is not wise to accept any dollar as long as it is green! Many social entrepreneurs for example are wary of funders for ethical reasons, as they often have an awkward relationship with the ‘normal’, profit-driven business world. But while of course it is right to think about ethics, there is nothing intrinsically suspect about venture capitalists or other investors. Most of us are really nice guys! My concern is a different one.
No two businesses are alike. Just the same, no two investors are alike. Different investors have different interests and strategies, different expertise and networks. It is essential to find one who is a good ‘fit’ for your business. Being dazzled by someone’s money and accepting investment on that basis alone can be a very expensive mistake. That’s because at some stage, every start-up will run into trouble. It will need to pivot, to adapt, to change. And you will need total alignment between all shareholders to make it work. But an investor who is not in tune with the business and its goals may become uncomfortable and consequently difficult to deal with. They will not be in a position to help. Or even worse: would not want to help.
Is everyone pulling on the same side of the rope?
In contrast, an investor who really ‘gets’ the business will see the need to adapt, and will be keen to help. Best of all is an investor whose own strategy and expectations are closely aligned with those of the business and the entrepreneurs behind it. A healthy relationship between those parties means the business benefits not only from a secure source of funding, but also from a meeting of minds. Having everyone pull on the same side of the rope is crucial if you are to overcome the hard times and use the learnings as stepping stones to accelerated success.
So, funding really isn’t a factor that can be separated from the rest of the process of founding and building a business. I’m convinced that great businesses are bought not sold. It is therefore much better to focus on the business than on the pitch. Get the five other success factors right and funding will follow. But finding the right funder can be the difference between success and failure. Investors ask: “show me the money!” to explore the true value behind your business. Rightfully so. But it is your duty to ask that same question in return.
P.S.: This post is the last in a series of six blogs covering the key ingredients for a successful business. You can find links to the published blogs below: